As I was browsing through my notifications this morning on BiggerPockets, I came across a question that quite frankly scares the crap out of me.
“Why do I need to get a real estate agent involved?”
If you’re a seasoned investor, then maybe I can understand trying to get by without an agent. But if you’re brand new starting out and haven’t even purchased your own home yet, then there is no excuse in the world for not having an exclusive agent to represent your interests.
In this article, I am going to outline the basics of different types of agents you will encounter and give you some reasons why having a dedicated investor-friendly agent is going to keep you from losing out on thousands of dollars and benefit you in the long-term.
First, Let’s Cover the Types of Agents You’ll Encounter
The Listing Agent
This agent represents the seller’s interest only. Legally, they cannot advise you on anything related to the sale because of their fiduciary duty to the seller. Their only goal is to get the best deal for the seller—period.
The Buyer’s Agent
This is the person who will be your friend and mentor if you have never purchased a home before. This is the person who will get you the best deal because they represent you and your interests only—oh, and, by the way, it’s free to you because the seller is going to pay your agent.
It is important to choose this person wisely. I feel that the best agents are passionate about real estate. True passion is easy to sense when talking to them. If you’re not getting this feeling from them, move on. If you have not read my article about how to find an investor-friendly agent, give it a read now.
The Dual Agent
In this scenario, the only person benefitting is the agent, as they get to collect the commission from the seller for both sides of the transaction, and they are not allowed to advise either party because of the fiduciary duties to each party. In some states, this form of agency is not allowed. In any case, this shouldn’t matter to you, because you are becoming smarter today by reading this and shouldn’t be dealing with the seller’s agent at all.
3 Ways a Buyer’s Agent Can Help You as an Investor
1. They are legally required to put your interests first.
When you’re driving around and see the perfect property to purchase for a buy-and-hold rental and dial the number on the sign, you’re being connected to the exclusive representative of the seller. Do you think the seller’s agent cares if you think the price is too high, want your closing costs paid, or don’t want to make repairs? No, they do not.
They want to get the highest possible asking price, they want you to pay all your closing costs, they want you to pay for every possible thing—and no, the seller does not get a discount if you do not bring an agent. The commission has already been negotiated long before you came along. The money is there for you to have an agent. Use it.
2. They will keep money in your pockets by helping you avoid pitfalls you don’t know about.
Let me give you an example. Bank representative sends an email saying the property you want to buy is not on the FHA/VA “approved list.” Because of that, you need to take certain steps that involve paying money, a substantial amount.
You tell your real estate agent about this, and she is ahead of the game. She tells you that the bank representative is wrong because the agent looked up the property before an offer was submitted. Turns out the bank representative just didn’t know how to use the website to find the property.
I recently experienced this exact scenario. If you don’t have a competent representative, you will never know, and the dollars will be flowing out of your checking account. Oh, and don’t expect to receive an apology from the bank—just an email saying, “It’s been a long day.”
No one will care about you more than your agent.
3. They might be your first mentor.
A lot of folks on BiggerPockets have not purchased their first property, and those same people are out seeking mentors to wholesale, flip, or whatever else. Many are having little success.
Guess what? The first step in long-term success as an investor is investing in yourself and purchasing a home. Then you can move on to other goals in real estate.
Related: 9 Things Real Estate Agents Wish Their Investor Clients Knew
During a purchase transaction, you will learn the basics of real estate if you ask your real estate agent to give you a basic rundown:
- How to find motivated sellers
- How to find comps
- How to evaluate a property
- How to negotiate with sellers
- The basics of a title company and what they do
- How to submit an offer
- How to structure an offer for the best possibility of acceptance
- Home inspection basics
- A lot more!
These are all things you need to learn to have long-term success as an investor, and you can learn them all during the purchase of your own home. Find a real estate agent who enjoys educating clients, and you will have your first mentor in real estate, you will gain a valuable asset at the end of the transaction, and you will learn valuable skills you can build upon after the deal is done.